Mr Markus Lyra, Director-General: The Baltic Dimension

"Mare Nostrum - Cities and Universities in Parnership" Conference Helsinki 8 November 2000

The Baltic Dimension
by Mr Markus Lyra, Director-General, Ministry for Foreign Affairs

Ladies and Gentlemen,

I am grateful for this opportunity to express a Finnish view on co-operation in the Baltic Sea Region, which is of growing importance – both political and economic – to Finland and the European Union. We see the Baltic Dimension as an essential part of the Northern Dimension of the Union’s policies. In describing our views on these dimensions I would like to concentrate on some of what I hope are the more relevant issues, such as energy, the environment and information technology. Then, to conclude, I would like to say a few words about the future of the Northern Dimension and more generally about co-operation in the Baltic Sea Region.

Potential of the Baltic Dimension

The Baltic Sea Region has great potential to strengthen its position as one of the most important growth centres in Europe, and indeed the whole world. The region’s economic growth figures are among the highest anywhere. Its 90 million inhabitants represent only about one and a half percent of the global total, but its share of world trade is about ten per cent. According to some forecasts, Poland will double its GDP in the next ten years and growth in the three Baltic States could be as much as 60 per cent in the same period. Growth in the European Union remains strong and Russia’s GDP is expected to grow 6% this year, and perhaps 4-5% in each of the next few years.

The countries that are candidates for membership of the Union have been determined in their efforts to prepare themselves for admission as soon as possible. The Nordic countries have, as you all know, supported them in many practical ways.

A survey that the Danish Ministry of Trade conducted for the Baltic Development Forum in Malmö a month ago indicated that reintegration of the Baltic Sea Region could bring the Nordic countries a prosperity gain of as much as 1 per cent of GDP. That is about half the effect created by the expansion of trade following German reunification. The survey also found that this could be enough to meet the addition to the EU budget that the cost of admitting all 10 Eastern European countries would require. I find this very promising and an interesting input in the discussion about eastward enlargement.

At the same time as the Baltic States and Poland are preparing to join the Union, also Russia is turning more towards Europe. The resurrected Russia is much more a European country than The Soviet Union ever was. Russian foreign policy likewise concentrates more on Europe. The numerous meetings between President Putin and Western-European leaders are ample proof of this.

EU enlargement to the East and Russia’s increasing interests in Europe are thus two important political trends which form a basis for co-operation in the Baltic Sea Region.


The enlarging Union and Russia are locked in a "positive interdependence". The Union will need to import much more energy in the future; according to some estimates, it will be importing 70% of its gas supply in twenty years from now. Almost 40% of Russian exports now go to the Union, and the figure will be over 50% after enlargement. More than 50% of Russian exports are energy in some form. This means we are actually in a "win-win" situation already. To further strengthen this Northern Dimension we should look at infrastructure, both normative and concrete.

The essential precondition for increased regional economic co-operation is a predictable, transparent and functioning legal base for investments and economic action. Private investors, both domestic and foreign, have to be certain that the rule of law applies and that legislation will be implemented. In other words, the investment climate has to be right. Much work is under way to narrow the normative divide between the countries in the region. It is an essential part of the membership process, and it features centrally in the Union’s co-operation with Russia under the Partnership and Cooperation Agreement.

A more integrated energy sector is therefore essential for increased economic exchanges in the region. It will also improve the security of supply. There is a need for new investment in transmission networks, especially to improve their interoperability. These questions are now at the top of the agenda in relations between the Union and Russia, as we saw at the EU-Russia Summit in Paris on 30 October.

The distance between gas fields and the areas where the gas is consumed will increase over the next few decades. The supply sources will shift from the North Sea more towards western Siberia and the Barents and Kara seas. Several major new pipelines have been mooted and some of them are certain to be built. For example the giant Shtokmanovskoye gas field in the Russian sector of the Barents Sea and the North Trans Gas pipeline project from Russia via Finland to Western Europe would be of strategic importance not only to the region, but to the whole of Europe. In particular, it would improve security of supply by providing a new and independent route, in addition to which natural gas produced by the Western partners in the field could create commercial diversification. Finland has supported the route option that would take the North Trans Gas pipeline offshore through the Gulf of Finland and the Baltic Sea. If forecasts concerning the demand for gas in Europe are correct, we shall need to build several new pipelines. The North Trans Gas Pipeline could probably be in use some time between 2010 and 2015.

Gas is not the only form of energy binding the Baltic Sea region into a tighter framework of co-operation. The same could be said about oil and it is most certainly true of electricity. The Nordic electricity market is an example of a developed electricity production and consumption system, "The Nordic Grid". Now is the right time to intensify work on "A Baltic Sea Grid", a common electricity market which would rationalise the use of resources and at the same time increase security of supply in the whole area.

For the region to truly benefit from this "positive interdependence" of the Northern Dimension one principle should be kept in mind. Energy investments should be based more on sound economic facts then on perceived geopolitical interests. Economics, not politics should determine where the pipelines of the future will run in the Baltic region.

The economic facts should of course also include environmental factors. Producing and transporting energy should make our environment better not worse. Energy and the environment are often very tightly interconnected. Replacing coal and oil with gas to generate heat and electricity can make an important contribution to implementation of the Kyoto Protocol.

Nuclear safety

The same is true of nuclear power plants. They are as such an environment-friendly way of generating electricity, but at the same time they create an enormous potential hazard.

The energy policy and practices of The Soviet Union created a major radiation threat along the eastern borders of the European Union.

The Chernobyl catastrophe showed the world that nuclear accidents can have significant consequences also in neighbouring countries. It is therefore necessary to build and maintain international networks that ensure preparedness against nuclear emergencies and radioactive fallout situations.

It is obvious that existing nuclear power plants will not be decommissioned in the current circumstances in Russia. The original lifetime of some of these units was envisaged as only 30 years. For economic reasons, however, there are plans to increase the life expectancy of some plants. It lies in our interests to join other Nordic and EU countries improving the safety of Russian nuclear power plants in our neighbouring areas. Joint projects have given Russian experts new insights into how to improve operating practices and the safety culture at those plants.

Some countries like Lithuania have provided examples of successful safety-improvement programmes. Finland is very pleased about the results achieved in the negotiations to start decommissioning of both reactors at Ignalina in the foreseeable future.

The environment

With the downfall of the Soviet Union Russia lost the major part of her port capacity in the Baltic region. It is therefore natural that the Russians now feel a need to develop their remaining ports and also to build new ones. As in the case of pipelines, however, the construction of ports should likewise be based on sound economic calculations, environmental factors included. The pipeline terminal under construction at Primorsk just east of the Finnish border will significantly increase the risk of oil spills in the Baltic Sea, particularly in the Gulf of Finland, thus placing a number of areas and species protected by EU directives at risk. Annual exports through the terminal are planned to total 12 million tonnes initially, later rising to as much as 40 million tonnes. According to some estimates, the growing number of oil shipments through the narrow sea lanes in the Gulf of Finland would increase the risk of oil spills there three- or fourfold.

Port construction and increasing oil shipments will require an improved ability on the part of both the international community and the Baltic Sea countries to respond in the event of oil spills. Plans for co-operation to prevent spills will have to be revised. The importance of providing information on the environmental impacts of the Primorsk terminal is emphasised by all countries in the Baltic Sea Region. Finland underlines the importance of an international environmental impact assessment in accordance with the ECE convention. The Finnish and Russian Prime Ministers, Paavo Lipponen and Mikhail Kasyanov, discussed the matter on 13 September 2000 and the latter promised Finland information on the environmental impacts.

Besides nuclear radiation and possible oil spills, the major – and in fact the most significant – environmental problem in the Baltic Sea Region is waste water treatment. Or to be more exact the lack of it.

Some ten years ago the Helsinki Commission made a list of the most dangerous environmental threats to the Baltic Sea Region. Among them, the lack of sewage treatment in St. Petersburg featured prominently. Now we have noticed with great interest that this problem is receiving increased interest both in St Petersburg and in Moscow. Finland has repeatedly signalled her willingness to participate in solving these problems. We have begun preparations for the project together with Sweden and the EU-Tacis Programme and with the Nordic Investment Bank as a co-ordinator. We hope that also the European Bank for Reconstruction and Development will consider taking part in this joint effort. The St. Petersburg treatment plant is crucial to the ecology of the Baltic Sea and provides an example of the kind of co-operation that promotes the sustainable development of the region.

Information Society

One of the important priority areas that Finland wanted included in the Northern Dimension Action Plan was the Information Society. What worries us is the emerging digital divide between the EU and north-western Russia. The union is creating its "eEurope", whilst Finland and her Nordic neighbours are leading information technology countries. We have to find solutions and take concrete actions to tackle the problem and diminish the gap that exists in the region. The main role for governments is to create a favourable legislative framework within which the telecommunication and IT sectors can develop. The applicant countries in the Baltic Sea Region are well on their way to implementing EU legislation in these fields.

Examples of other new challenges are the rapid development of wireless communications, the growing demand for high-speed services, rapidly growing e-commerce and globalisation of telecommunications. Finland together with Estonia are leading the IT work within the Council of Baltic Sea States framework. As you might have noticed, the Estonian government is nowadays conducting its decision-making process in a paperless environment.

The Prime Ministers put the Information Society issue high on their agenda at their Nordic-Baltic meeting in Pärnu earlier this autumn.

The Northern Dimension

While the Northern Dimension initiative was in the preparatory stage, some comparisons to the so-called Barcelona process were made, but there was one important distinction: the Northern Dimension did not require the creation of any new EU budget lines or institutions. That was a political prerequisite for the success of the initiative, and the programme that it created is today an integral part of the European Union’s external relations and cross-border policies. Now, unlike in the past, the Union has a comprehensive and detailed programme for its northern regions. The Action Plan endorsed at the summit in Feira in June sets out the objectives and perspectives for actions during the years 2000-2003 in those sectors where the expected added value is greatest. In the Feira summit conclusions, special attention is given to the environment, nuclear safety, the fight against international crime and the Kaliningrad region.

Now we have to identify what the EU, the Commission and the partners can jointly do to promote implementation of the Northern Dimension Action Plan. We should encourage all actors to initiate projects for and actions in line with the plan. The overall role of the Commission is crucial but all member and partner states will have to contribute. The tools of the Commission lie within the existing legal frameworks and budgetary instruments, such as the Phare, Ispa, Sapard, Tacis and Interreg III programmes and the relevant sectorial programmes. The implementation of the Action Plan would benefit from enhanced co-operation and joint financing from these Community funds and national programmes as well as from international financial institutions and the private sector. Those partners who can identify projects of their own and are ready to take part in the co-financing structures will benefit most from the Northern Dimension. The keywords here are synergy, efficiency and better co-ordination.

Some results should be presented at the ministerial-level follow-up conference on the Northern Dimension that will take place in Luxembourg on 9 April 2001, during the Swedish Presidency. If this can be achieved, Sweden will guarantee continuity and contribute to the effective implementation of the Action Plan. Sweden will also, as is mentioned in the Feira conclusions, collaborate with the Commission in drafting a full report on the Northern Dimension policies for presentation to the European Council in Gothenburg in June 2001.

The Commission is now working on the implementation of the Action Plan and is identifying appropriate follow-up proposals in all sectors where the expected added value is greatest.

Future Regional Co-operation

Although the Northern Dimension is part of the Union’s external and cross-border policies it creates – in common with EU enlargement – new opportunities for everyone in the region. Bodies such as the Council of the Baltic Sea States, the Barents Euro-Arctic Council and the Arctic Council (which Finland will chair for the next two years) could serve as co-ordination, information and follow-up fora and help in the identification of joint priorities in the region. The German CBSS presidency has already approached sub-regional actors around the Baltic Sea in order to identify feasible project ideas. Also in Germany the northern Länder have been very active; for example a Diskussionforum on the Northern Dimension took place in the Mecklenburg-West Pomeranian city of Schwerin last August. To keep the process going we need initiatives of this kind to promote cooperation between actors on different levels.

Since our venue today is the University of Helsinki, I would like to mention that we are constantly looking for academic studies on the subject of the Northern Dimension. One paper recently presented by the Russian Academy of Sciences was written by Mr. Yuri Deryabin, a former Russian Ambassador to Finland.

Under the auspices of the Trans European Policy Studies Association (TEPSA), Professor Bertel
Heurlin from the Danish Foreign Policy Institute (DUPI) in Copenhagen is preparing a paper on the
Northern Dimension and the US, Baltic States and Russia.

These two studies are good examples of ongoing work and of possibilities to have an academic input into the process.

Finland very much appreciates the work being done by researchers at various Institutes and Universities in the Baltic Sea Region under the umbrella of the Northern Dimension. They have in many cases broadened the scope of the Northern Dimension by involving also "hard security issues". An example is "Programme on the Northern Dimension of the CFSP" drafted jointly by the Finnish Institute of International Affairs and Das Institut für Europäische Politik in Berlin. The line between "hard" and "soft" security is often difficult to determine, but both should always have the same goal: to maintain peace and stability and ensure good cooperation in the region.

The Finnish Government believes in the future of the Northern Dimension and will, as an active member of the Union, give its full support to all actors developing contents for the policies that the programme embraces. Now it is up to everyone involved to continue the process.

Thank You.